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2005-07-11Buch DOI: 10.18452/3903
New Evidence on the Puzzles
dc.contributor.authorScholl, Almuth
dc.contributor.authorUhlig, Harald
dc.date.accessioned2017-06-15T22:57:17Z
dc.date.available2017-06-15T22:57:17Z
dc.date.created2005-09-01
dc.date.issued2005-07-11
dc.identifier.issn1860-5664
dc.identifier.urihttp://edoc.hu-berlin.de/18452/4555
dc.description.abstractPast empirical research on monetary policy in open economies has found evidence of the "delayed overshooting", the "forward discount" and the "exchange rate" puzzles. We revisit the effects of monetary policy on exchange rates by applying Uhligs (2005) identification procedure that involves sign restrictions on the impulse responses of selected variables. We impose no restrictions on the exchange rate to leave the key question as open as possible. The sign restriction methodology avoids the "price puzzles" of the identification strategies used by Eichenbaum-Evans (1995) and by Grilli-Roubini (1995, 1996), which are particularly pronounced, when using an updated data set. We find that the puzzles regarding the exchange rates are still there, but that the quantitative features are different. In response to US monetary policy shocks, the peak appreciation happens during the first year after the shock for the US-German and the US-UK pair, and during the first two years for the US-Japan pair. This is consirably quicker than the three-year horizon found by Eichenbaum-Evans. There is a robust forward discount puzzle implying a large risk premium. We study this issue, introducing and calculating conditional Sharpe ratios for a Bayesian investor investing in a hedged position following a US monetary policy shock. For foreign monetary policy shocks, we find more robust results than with the Grilli-Roubini recursive identification strategy: the posterior distribution regarding the exchange reaction looks rather similar across countries and VAR specifications. In particular, we find that there seems to be considerable uncertainty regarding the initial reaction of the exchange rate. Quantitatively, monetary policy shocks seem to have a minor impact on exchange rate fluctuations.eng
dc.language.isoeng
dc.publisherHumboldt-Universität zu Berlin, Wirtschaftswissenschaftliche Fakultät
dc.rights.urihttp://rightsstatements.org/vocab/InC/1.0/
dc.subjectvector autoregressionseng
dc.subjectagnostic identificationeng
dc.subjectforward discount bias puzzleeng
dc.subjectexchange rate puzzleeng
dc.subjectexchange rateseng
dc.subjectmonetary policyeng
dc.subject.ddc330 Wirtschaft
dc.titleNew Evidence on the Puzzles
dc.typebook
dc.subtitleResults from Agnostic Identification on Monetary Policy and Exchange Rates
dc.identifier.urnurn:nbn:de:kobv:11-10045574
dc.identifier.doihttp://dx.doi.org/10.18452/3903
local.edoc.container-titleSonderforschungsbereich 649: Ökonomisches Risiko
local.edoc.pages63
local.edoc.type-nameBuch
local.edoc.container-typeseries
local.edoc.container-type-nameSchriftenreihe
local.edoc.container-volume2005
local.edoc.container-issue37
local.edoc.container-year2005
local.edoc.container-erstkatid2195055-6

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